|
The table below shows correlations between pairs of investments.
This is the correlation of calendar year total returns available for
both investments.
Interpretation
Correlation is important for diversification.
A diversified portfolio includes assets with low or negative correlation.
Assets that are highly correlated (correlation closer to 1.0) tend to lose value at the same time.
Investors with large sums of money in highly correlated assets risk substantial losses.
Uncorrelated assets (correlation closer to 0.0) tend to move up and down independently of one another—
when one goes down, the other may go up or down with normal probability.
For example, gold and bonds are the best diversifiers to the S&P 500 in this table.
Unfortunately, all we can provide are historical values.
These should be helpful, but correlations will change in the future.
Examples
The correlation between gold and the S&P 500 has been 0.11—positive but small.
This comes from the table entry under the S&P 500 column in the gold row.
That correlation is based on calendar years 1955-2022, because those are the years with data for both
assets.
Table of correlations
|
S&P500 |
US Small-cap Value |
NASDAQ-100 |
Gold |
Bloomberg US Agg Bonds |
MSCI World ex USA |
|---|
| US Small Cap Value (1928-) |
0.80 |
|
|
|
|
|
|---|
| NASDAQ-100 (1986-) |
0.82 |
0.38 |
|
|
|
|
|---|
| Gold (1955-) |
0.11 |
-0.06 |
-0.02 |
|
|
|
|---|
| US Agg Bonds (1976-) |
0.28 |
0.21 |
0.11 |
-0.09 |
|
|
|---|
| MSCI World ex USA Equity (1970-) |
0.68 |
0.47 |
0.59 |
0.08 |
0.09 |
|
|---|
| US Real Estate (1978-) |
0.47 |
0.72 |
0.19 |
0.20 |
0.14 |
0.36 |
|---|
Related links
S&P 500 historical annual returns
Dow historical annual returns
Real estate (REIT) fund VNQ historical annual returns
| 